One, Two, Three, Four, Let's Have a (Minor) Trade War!
What ever happened to the free trade Democrat?
Pity the libertarian Obama supporter—or, to use that peculiar solecism, the "liberaltarian"—who cast their lot with the Democratic nominee, more out of rejection of the Bush years than ideological affinity. It was, to use the language popular at the time, based on an ill-defined sense of hope. With the obvious exception of Atlantic blogger Andrew Sullivan, are any of those who identified themselves as free-market, small government Obama voters thus far pleased with the results?
Consider the endorsement Barack Obama received from Scott Flanders, the libertarian CEO of Freedom Communications, the owner of the Orange County Register. According to Register columnist Frank Mickadeit, when Flanders debated former Reason editor Tibor Machan in 2008, he surprised the audience by proclaiming that Obama was "the best candidate to work on four top libertarian reforms: 1) Iraq withdrawal, 2) restoring the separation of church and state; 3) easing off victimless crimes such as drug use; 4) curtailing the Patriot Act."
Well, let us take a very narrow window of time—the previous 24 hours—and give Obama's inchoate libertarianism a very loose doctrinal purity test. Yesterday, as noted by Reason's Brian Doherty, the administration announced that 3,000 more troops were headed to Afghanistan, and 1,000 more headed to Iraq—on top of the surge of troops previously deployed to fight the Taliban. And yesterday, according to the Associated Press, the administration signaled its support for the extension of "three key provisions of the Patriot Act that are due to expire at the end of the year, the Justice Department told Congress in a letter made public Tuesday." And how about one more from yesterday. According to this report from the BBC, the change agents at the White House have "extended the 47-year-old trade embargo against Cuba for another year."
That the administration plans on extending the failed embargo and travel ban on Cuba is, for those paying attention, unsurprising. Though he had opposed the Helms-Burton Act's continuation of the embargo while a senator ("It's time for us to acknowledge that that particular policy has failed"), a presidential run necessitated Obama's reassessment of the Trading With the Enemy Act. In a largely overlooked speech to Cuban-American voters in Miami—surprise!—the presidential hopeful promised to "maintain the embargo" as a way of inducing democratic change on the island, a policy bearing no fruit since the Kennedy administration.
Like much else emanating from the White House these days, the administration's position on Cuba is incoherent and contradictory. Indeed, in an interview with Bloomberg the day before he announced plans to continue the embargo, Obama maintained that he "want[ed] to further expand trade." Perhaps not with Cuba—Americans are, after all, accustomed to the island existing only for the farmers and tourists of Europe, Canada, and Latin America—but the president was responding to criticism about his recent decision to slap a 35 percent tariff on Chinese tires. In other words, he wants to promote free trade by practicing protectionism.
An economics Ph.D. wasn't required to predict that the Chinese government would respond with tariff threats of its own, on everything from auto parts to imported chicken. As The Detroit News editorialized, the president might want to consider that "last year U.S. auto companies agreed to export more than $2 billion in vehicles and auto parts to China," much of which comes from Michigan. And with the constant media bleating about a "New New Deal" and magazine editors imagining the president as a modern incarnation of Franklin D. Roosevelt, one cannot help, in the largest economic downturn since the Great Depression, if minds wander to the ruinous Smoot-Hawley Tariff passed by President Herbert Hoover in 1930.
It was likely Hoover's great mistake—or, perhaps, elementary economics—to which the president referred when, earlier this year, he professed a "collective commitment to encourage open trade and investment, while resisting the protectionism that would deepen this crisis." After the Chinese publicly admonished the White House, Obama told a reporter that "it's in China's interests and our interests and the world's interests to avoid protectionism, particularly just as world trade is starting to bounce back from the huge declines that we had seen last year." These spasms of doublespeak are no doubt being cataloged by his opponents, ready to be deployed in the 2012 election. Imagine the fun Republicans could have with Obama's laughable claim, to a group of sinister Wall Street capitalists, that he has "always been a strong believer in the power of the free market."
It doesn't require a special level of cynicism to think that while the administration understands that punishing Chinese manufacturers makes little economic sense, the move makes a certain amount of political sense. In his rush to protect "American jobs" in an economy where so few jobs are currently available, Obama can claim that bone-headed protectionism has a positive effect on American industry, which might make sense to those who have never thought about basic economics (i.e., if Chinese goods are more expensive, it will even the playing field for American goods, at no cost!), while also repaying those delightful union honchos, so graciously supporting his attempts at health care reform. And if there was anything less surprising than the Chinese government's response to the tariff, it was the gleeful reaction of Big Labor. As The New York Times observed, "organized labor, having tasted success in this case, is pressing Mr. Obama to take tougher stances on a number of upcoming trade issue."
With this basic political calculation in mind, don't expect any movement on a free trade deal with Columbia anytime soon (which candidate Obama opposed in a speech to the AFL-CIO) or to see Mexican trucks operating in the United States anytime soon.
Perhaps the American Chamber of Commerce, which has calculated that further inaction on free trade agreements with South Korea, China, Colombia, and Mexico could potentially cost thousands of American jobs, is right in cautioning that this is a small salvo in a developing trade skirmish, and not the Fort Sumter of a forthcoming trade war. But there is ample cause for concern, as evidenced by the "Buy American" provision in the stimulus package, the administration's lack of movement on other vital free trade deals (like Colombia), and the president's history of waffling on whether NAFTA was a positive or negative development for the American economy.
As Reason contributing editor David Weigel wrote in 2008, NAFTA was "a New Democratic victory over the old union elements of the party." But free-market Clintonism is dead, and the old union elements have returned to their traditional place in the party. It was fashionable in the years following the 2000 election to lament the imposition of the 22nd Amendment, to wish that Bill Clinton could be our very own Hugo Chavez, running the country indefinitely. Eight years later, I'm starting to see their point.
Michael C. Moynihan is a senior editor at Reason magazine.
